KazMunaiGas exec quits as Karachaganak talks toughen

ASTANA – A key negotiator of Kazakhstan’s government for major oil and gas projects, First Vice-President of the national company KazMunaiGas (KMG), Maksat Idenov, has submitted his resignation. While the news of Idenov’s resignation is discussed in the national company, the foreign investors are waiting for further developments to figure out what the former Soviet republic’s future oil and gas policy may be.
“Immediately after a regular vacation leave, Maksat Idenov submitted his resignation,” a KMG source close to Idenov told New Europe. This information was confirmed by KMG’s Director of Public Relations Department Galym Tumabayev. “Yes, Maksat Idenov, who occupied the position of First Vice-President, submitted his resignation in early April. So far, there has been no order to release him,” Tumabayev said.
In the meantime, according to a source talking on condition of anonymity, Idenov replacement has been identified, but the source would not disclose the name.
While the reporters are guessing who will replace Idenov, the foreign investors are hoping that the latest reshuffles in the national company will bring changes to Kazakhstan’s oil and gas policy. In 2007, at a personal order from President Nursultan Nazarbaev, Idenov led the negotiations between the Kazakh government and the international consortium AGIP KCO on Kashagan, the world’s largest oil field located in Kazakhstan’s sector of the Caspian shelf. That assignment had not been by chance. Idenov had had a good first hand experience in the Middle East, Northern Africa, and South Asia. He speaks perfect English and knows every nuance of the management process. Those difficult negotiations lasted for almost 18 months and had resulted in Kazakhstan gaining its point and doubling its share in the North-Caspian project Kashagan from 8.33% to 16.81%.
In addition, the negotiators agreed on a final date for Kashagan’s first oil – December 1, 2012. That being said, the consortium was given an absolutely final deadline for its first oil – December 31, 2013. As well, the negotiations had resulted in the creation of a new operating company, NCOC (North Caspian Operating Company), which completely changed the distribution of roles and responsibilities among the participants of the international consortium involved in the development of that oil field. Notably, in fulfilling the president’s instruction, it was Idenov who clearly raised the question before the negotiators about increasing the number of local personnel in the North-Caspian project. “I remember, when I first started to work on the negotiations and gathered all personnel of the consortium in Atyrau, I asked for the KazMunaiGas specialists to stay back. It turned out that out of the 380 personnel, they were only nine. From that moment on, I started to raise the question that the Kazakhstan specialists – talented guys – were present at all levels of decision making, including the first vice-president of the consortium,” Idenov told New Europe in an earlier interview. Now this decision is written in an agreement that was signed after the negotiations. The new operating company will have 274 Kazakhstan nationals seconded to it.
According to the Kazakh and foreign oilmen, Idenov was a tough negotiator. Starting last year, in his new capacity, he oversaw all the major oil and gas projects in the republic, including Kashagan, TCO, Karachaganak, and Structure “N.” Lately, he was involved in difficult negotiations on Karachaganak. Just like in the Kashagan negotiations, Idenov took a very tough stance. Late September last year, a large shareholder in the Karachaganak project, BG Group, filed a lawsuit with the London Court of International Arbitration for return of unlawful, in their opinion, export payments. However, as soon as October, the company suspended the legal actions against Kazakhstan.
The main reason for the current difficult relations among the shareholders of the Karachaganak project is that the international consortium is operating under a Final Production Sharing Agreement (FPSA) signed with the government of Kazakhstan back in November 1997.
The FPSA provide that the consortium will manage the Karachaganak project until 2038, and that no new taxes or levies will apply to its participants. “There are serious reasons for Kazakhstan to enter this project. It is the balance of interests that we have talked about on numerous occasions before. They tell us “we fulfill the plan of production, we invest”. But at what cost, if the republic receives scraps from the investments that they make?” Idenov said earlier.
Karachaganak Petroleum Operating (KPO) is a consortium of companies that was formed to operate the Karachaganak project. The consortium includes British BG Group, Italy’s ENI each with a 32.5 % interest, US major Chevron with 20%, and Russia’s LUKoil with 15%. KCO operates one of the world’s largest oil and gas condensate fields.
New Europe could not reach Idenov to ask about the reason for his resignation or his new job. According to the source, Idenov is currently abroad.

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